In a late-day turnaround, US equities climbed as dip-buyers emerged ahead of a busy week of large tech reports.
After plunging to lows near 4200, the S&P 500 recovered back in a bumpy afternoon session to conclude near the day's highs. The Nasdaq 100, which is heavily weighted in technology, increased by more than 1%. After billionaire entrepreneur Musk decided to buy the social networking platform, Twitter increased its gains. Alphabet, Apple., Amazon, and Meta Platforms are all expected to post earnings.
As China's COVID outbreak exacerbated anxieties generated by faster Federal Reserve tightening, stocks in Europe and Asia plummeted. The Stoxx 600 Europe index dropped, with miners and energy companies leading the way. Despite a sell-off in other raw resources, west Texas intermediate futures fell below $100 a barrel. Bonds increased in value.
Fears of tighter restrictions in Beijing have spooked investors who are already concerned about the likelihood of a global downturn as the Federal Reserve raises interest rates to combat inflation. A wide index of Chinese equities fell to its lowest level in nearly two years as policymakers imposed a curfew in some parts of the capital, despite the government's firm devotion to its COVID-zero policy.
According to Morgan Stanley's Wilson, the S&P 500 is likely to plummet as investors seek safe havens amid fears that aggressive Fed action could precipitate a recession. In a report released on Monday, Morgan Stanley strategists stated that a rapidly tightening Fed is looking "straight into the fangs of a slowdown," and that crowded defensive equities no longer pay.
Global government bonds rose as a result of a flight to safety, with the yield on the US benchmark note falling 10 basis points. After Macron's victory in the French election eliminated a big risk for markets, the dollar continued to rise, while the euro sank. Gold has lost approximately 2% of its value.
The drop in commodity prices since Russia's invasion of Ukraine on Monday has done little to allay fears of out-of-control inflation.
Last week, Fed Chair Jerome Powell presented his most aggressive approach yet to taming rising prices, while the European Central Bank signaled tighter monetary policy.
However, as it seeks to strengthen its economy, China's central bank is in a different position. It lowered the number of money banks must keep in reserve for their foreign-currency assets on Monday, causing the yuan to recover some of its recent losses.